A fund manager is responsible for implementing and managing an investment strategy for a fund, making sure the assets within that fund are aligned with its chosen theme or mandate.
A fund can be managed by just one person, or it can be co-managed by a team of people, and the ultimate responsibility of making sure the fund gives its investors a return stops with them.
Most fund managers will have many years of investment or financial experience behind them and will be professionally qualified to do their job, but the fund manager rarely works alone and requires support from teams of investment analysts to help inform their investment decisions. History shows they tend to work for larger asset management houses for at least the early part of their careers before choosing to go it alone and set up their own fund, once their reputation is proven.
They analyse and purchase company shares according to their chosen theme, balancing risk and expected reward, buying shares in a company when they think they represent good value and selling them when they think their performance is at or near its peak; choosing how much to commit to different stocks, asset classes and locations, stemming losses in market downturns and maximising rises when markets are on the up.
Their strategies can vary significantly. Some are more passive, preferring to buy and hold, others are active – buying and selling frequently. Some take “activist” positions with the companies they invest in and try to influence decisions, others prefer not to get involved in the company management at all.
Whatever their strategy and approach, they should know the companies they invest in inside out. All share the aim of making the most money they possibly can over a given time period and balance volatility and risk for investors.
The quality of a fund and the quality of the fund manager will be closely aligned, and consistent performance over long periods of time will be a key indicator of a good fund manager.
Some high profile and successful fund managers such as Neil Woodford, who is arguably one of the most revered fund managers in the UK right now (The Woodford Equity Income Fund manages £10 billion of people’s life savings), and Terry Smith, who runs the Fundsmith Equity Fund, are considered industry veterans and have been shown to stick to their disciplined process during times of volatility.
Not all fund managers will adopt the same investment strategies, however, and you’ll need to make sure that the theme of the fund and the style of the fund manager are suitable for your own investment goals and strategies before choosing one to invest in. You can do this by researching the Key Investor Information Document (KIID) that all funds are required to have available.
Although past performance is never an indication of what will happen in the future, looking at the performance of a fund over at least a five year period will give you a clear indication of how well the manager has performed.
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Selftrade does not provide investment advice. This article is the authors view and is not the view or opinion of Selftrade and Selftrade accepts no liability for any loss caused as a result of the use of this information. The opinions expressed are those of the author at the time of writing and should not be interpreted as investment advice.
The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance. We do not provide advice or make recommendations about investments. If you have any doubts about the suitability of an investment, you should seek advice from a suitably qualified professional adviser.